Results for the 12 months ended 31 December 2024

Results for the

 12 months ended

31 December 2024

tritaxbigbox.co.uk

28 February 2025

Transformational year with significant strategic progress and excellent operational performance

Record rental reversion, attractive development pipeline and compelling data centre opportunities

Delivering highest total accounting return level since 2021

2024 key figures 

Completion of £1.2bn strategic acquisition of UK Commercial Property REIT Limited (UKCM)

· High-quality urban logistics assets complement existing portfolio, broaden client offer and increase income and capital growth potential, with 39% rental reversion at acquisition.

· Quality of acquired logistics assets reflected in 3.9% ERV growth and a 5.8% uplift in asset values since June 2024. 

· Cost savings support earnings growth and enhance balance sheet strength by lowering LTV.

· £181.2 million or 38% of non-strategic assets disposals exchanged or completed since acquisition at a premium to book value.

Rental income growth supporting Adjusted EPS growth, enhanced by DMA contribution

· 39.1% increase in contracted annual rent to £313.5 million (31 December 2023: £225.3 million) driven by UKCM acquisition, asset management and development activity.

· 15.0% increase in Adjusted EPS to 8.91 pence (2023: 7.75 pence) driven by net rental income growth and Development Management Agreement (DMA) income.

o  Adjusted EPS excluding additional DMA income grew 3.9% to 8.05p (2023: 7.75p).

· 12.6% EPRA cost ratio excluding vacancy costs (2023: 13.1%) reduction driven by UKCM synergies and efficient externally managed structure. 13.6% EPRA cost ratio including vacancy costs (2023: 13.1%), reflecting assumed vacancy from UKCM acquisition.

Future earnings growth supported by record logistics portfolio reversion

· 5.4% like-for-like Estimated Rental value (ERV) growth across logistics portfolio for the period (2023: 6.9%).

· Record 27.9% logistics portfolio reversion provides potential to capture £79.2 million of additional rent, of which 79% has the potential to be captured by 2027, supporting future earnings growth.

· Increase in total portfolio value to £6.55 billion (31 December 2023: £5.03 billion), following the acquisition of UKCM, with equivalent yield remaining broadly stable at 5.68% (31 December 2023: 5.60%).

· 2.8% portfolio capital value increase (2023: 0.8% reduction) driven by income growth and asset management, increasing to 3.7% when including the £67.8 million net gain on the UKCM acquisition.

Growing rental income through active management

· £11.6 million added to annual contracted rent through rent reviews and asset management initiatives:

o  Including 34.6% increase in aggregate across open market linked rent reviews settled in period.

o  4.1% annualised rental growth across rent reviews settled in period (2023: 3.3%).

· 3.9% EPRA like-for-like rental growth reflects ongoing market rental growth and higher proportion of reviews (2023: 3.6%).

3.3% premium achieved on £306.2 million of disposals - 38% of non-strategic UKCM assets sold

· £181.2 million, representing 38% of UKCM non-strategic exchanged or sold:

o  6.2% blended NIY, achieving a 2.8% premium to the market value at time of acquisition:

o  £86.8 million of which is scheduled to complete in Q1 2025.

o  Further approximate £177.4 million of UKCM related non-strategic assets currently under offer.

· £125.0 million of additional disposals from logistics portfolio at a 5.0% NIY, achieving a 4.1% premium to book values, £79.0 million of which completed in Q1 2025.

· £46.0 million acquisition of 479k sq ft East Midlands cold store let to Co-Op, with 7.3% reversionary yield.

· Post period end completed £74.3 million acquisition of 627k sq ft cold-store building in the North West let to Sainsburys at a 6.0% NIY, expected to achieve a running yield of 7% by 2028.

Developing best-in-class logistics assets to drive earnings growth

· £11.1 million of new contracted rent secured from development lettings, including 1.0 million sq ft pre-let to a global leader in e-commerce, representing one of the UK's largest pre-lets in 2024.

· 1.9 million sq ft of development starts in 2024, including 0.4 million sq ft which has been pre-sold under a DMA contract, and expected to deliver a 7% average yield on cost.

· Development starts for FY25 expected to be in line with FY24 levels and within our 2-3 million sq ft guidance.

o  DMA income expected to contribute £10 million to FY25 operating profit.

· Development yield on cost expected to be at the upper end of 6-8% guidance for 2025 starts.

· 21% reduction in weighted average embodied carbon from completed developments to 287 kg CO2e per m2 (2023: 365 kg CO2e per m2).

Strong balance sheet well positioned to support our strategy

· 28.8% LTV at 31 December 2024 (31 December 2023: 31.6%) and Net Debt/EBITDA5 of 7.3x (31 December 2023: 8.2x).

· 3.05% weighted average cost of debt (31 December 2023: 2.93%), with 93.4% of drawn debt either fixed or hedged.

· Over £550 million of available liquidity as at 31 December 2024, 4.5 year average debt maturity and no refinancings prior to June 2026.

· Upgrade from Moody's of credit rating outlook to Baa1 (positive) from Baa1 (stable).

147 MW data centre opportunity and 1 GW pipeline announced post year end

· Phase 1 Manor Farm targeting 9.3% yield-on-cost and significant development profits.

· Expected to be one of the UK's largest data centres, targeting delivery of 107 MW Phase 1 data centre in H2 2027, with a possible second phase data centre of 40 MW.

· Accelerated power delivery via joint venture with a leading European renewable and low carbon energy power generator.

· Additional c.1 GW pipeline of UK opportunities identified.

Commenting on the results, Aubrey Adams, Chairman of Tritax Big Box REIT, said:

"This has been an exceptional year for the Company, marked by significant transformational change alongside strong operational performance. The acquisition of UKCM has complemented our portfolio with high-quality urban logistics assets offering substantial rental reversion potential. The quality and liquidity of UKCM's assets is further demonstrated by our ability to sell non-strategic assets above their December 2023 valuations, unlocking additional capital to fund future growth. Operationally, the Manager has captured significant rental income through proactive asset management and development activities, including securing one of the year's largest pre-lets.

"We enter 2025 well positioned with three powerful growth drivers in our business: capturing record rental reversion, advancing our highly attractive logistics development pipeline, and leveraging opportunities to develop data centres with the potential for exceptional returns."

Results presentation and Q&A

A Company presentation for analysts and investors will take place via a webcast with live Q&A at 8.00am (GMT) today and can be viewed at:

https://brrmedia.news/BBOX_FY_24

If you would like to ask a question verbally rather than through the webcast viewer, please join the presentation conference call:

UK: +44 (0) 33 0551 0200

USA: +1 786 697 3501

Password: Tritax FY24

Retail investor webcast and Q&A

The Company will also host a live interactive presentation aimed at retail investors on the Engage Investor platform, at 2:00pm (UK time) today. This can be accessed via:

https://engageinvestor.news/BBOX_IP25

Colin Godfrey (CEO) and Frankie Whitehead (CFO), who will host the event, welcome current shareholders and interested investors to join. Questions can be submitted prior to the webcast via the Engage Investor platform, or at any time during the live presentation.

Investors can sign up to Engage Investor at no cost and follow Tritax Big Box REIT plc from their personalised investor hub.

Notes 

1. Operating profit before FV movements and other adjustments. 

2. See Note 15 to the financial statements for reconciliation. 

3. The anticipated run rate for Development Management Agreement (DMA) income is £3.0-5.0 million per annum over the medium term. We classify income above this as 'additional' development management income, which can be highly variable over time. We therefore present a calculation of Adjusted EPS that excludes additional development management income. £23.0 million of DMA income is included in the 8.91p Adjusted earnings per share in 2024. 2023: £nil included in 7.75p Adjusted earnings per share). 

4. The Portfolio Value includes the Group's investment assets and development assets, land assets held at cost, the Group's share of joint venture assets and other property assets. 

5. Calculated based on pro-forma EBITDA inclusive of full twelve months contribution of UKCM, adjusted for fair value of UKCM debt at acquisition.

6. An alternative performance measure. The Group uses a number of financial measures to assess and explain its performance, some of which are considered to be alternative performance measures as they are not defined under IFRS. For further details, see the Financial review and Notes to the EPRA and other key performance indicators section, as well as definitions in the Glossary.

For further information, please contact:

Tritax Group

Colin Godfrey, CEO +44 (0) 20 8051 5060Frankie Whitehead, CFO [email protected] Brown, Head of Corporate Strategy & Investor Relations

Kekst CNC

Tom Climie/Guy Bates +44 (0) 77 601 60 248 / +44 (0) 75 810 56 415

Email: [email protected]

The Company's LEI is: 213800L6X88MIYPVR714

Notes: 

Tritax Big Box REIT plc (ticker: BBOX) is the largest listed investor in high-quality logistics warehouse assets and controls the largest logistics-focused land platform in the UK. Tritax Big Box is committed to delivering attractive and sustainable returns for shareholders by investing in and actively managing existing built investments and land suitable for logistics development. The Company focuses on well-located, modern logistics assets, typically let to institutional-grade clients on long-term leases with upward-only rent reviews and geographic and client diversification throughout the UK.

The Company is a real estate investment trust to which Part 12 of the UK Corporation Tax Act 2010 applies, is listed on the Official List of the UK Financial Conduct Authority and is a constituent of the FTSE 250, FTSE EPRA/NAREIT and MSCI indices. 

Further information on Tritax Big Box REIT is available at www.tritaxbigbox.co.uk 

Chairman's statement

A transformational year with significant strategic progress and excellent operational performance

In 2024, we made significant progress across all our strategic priorities. The acquisition of UK Commercial Property REIT Limited (UKCM) expanded our client offering and strengthened our presence in key urban logistics markets. At the same time, we accelerated contracted rent growth through capturing portfolio rental reversion, active asset management and strong leasing activity within our development pipeline. We also successfully executed asset disposals at the top end of our guidance and ahead of book values, enabling us to recycle capital into accretive growth opportunities. We enter 2025 with an outstanding portfolio, exceptional clients, the UK's largest logistics development land platform and substantial opportunities for further growth, including the expansion into data centres.

Maximising value and income growth from the UKCM acquisition

Since we acquired UKCM in May 2024 we have completed the integration process and are firmly on track to realise the benefits we expected. UKCM added £1.2 billion of assets to our portfolio, including £740 million of logistics assets with strong income growth potential, including an embedded 39% reversion, which we have already begun to capture. The quality of the logistics assets within the portfolio was reflected in 3.9% ERV growth and a 5.8% uplift in asset values since June 2024. We have also made excellent progress in divesting, ahead of their market value at the time of the acquisition, nearly 40% of UKCM's non-strategic assets, with £94.4 million of disposals completed by the year end, a further £86.8 million exchanged post year end and a further approximate £177.4 million under offer. We are seeing encouraging levels of interest in the remaining non-strategic assets and are confident of divesting them within 24 months from the date of the acquisition as planned.

Multi-year and inherent opportunities to drive earnings and dividend growth

We operate in a highly attractive market, underpinned by strong structural drivers of occupier demand. Businesses are increasingly nearshoring to build shorter, more resilient supply chains; optimising efficiencies and economies of scale to protect margins; and leveraging automation to mitigate rising employment costs. The Board believes improving sustainability performance, as reflected in our very strong GRESB ratings, positively impacts the Company's performance, with our Clients preferring modern buildings that can both reduce costs and provide attractive and safe working environments for their employees.

At the same time, we have clear and significant opportunities to drive earnings and dividend growth from prospects inherent within our business, capitalising on our investment, asset management and development expertise.

There are three distinct elements embedded within our business that offer multi-year opportunities to drive earnings and dividend growth:

1. capture the record rental reversion in the investment portfolio and secure lettings for vacant space, which together have the potential to increase rental income by 27.9% or £79.2 million of which 79% has the potential to be captured by 2027;

2. construct additional best-in-class logistics assets from our development platform which can more than double our current rental income over the longer term and, for 2025, targets a yield on costs of towards the top end of our 6-8% range, and;

3. deliver data centre development opportunities, including our first at Manor Farm, Heathrow, which is expected to deliver exceptional returns for shareholders and a potential 8-10% yield on cost.

"Power first" approach delivering significant opportunities in data centres

Post our year end, we announced the acquisition of a site at Manor Farm, Heathrow. Subject to planning, this provides us with the opportunity to develop one of Europe's largest and highest-quality data centres, subject to planning permissions, which we believe will be attractive to the world's largest data centre operators. Crucially the Manager, having adopted a "power first" approach, has secured contracted and accelerated power delivery of 147 MW to the site using pre-existing grid connection agreements, 107 MW of which will be provided in H2 2027 and 40 MW in 2029. The anticipated yield on cost from Phase 1 is approximately 9.3%, complementing the returns within our logistics development pipeline. Phase 2, leveraging the investment in Phase 1, has the potential for an even higher yield on cost.

Ongoing investment by the Manager in its capabilities

We have previously noted the Manager's strong track record of adding skills and experience to support our growth. In 2023 and 2024, it strengthened the asset management team to maximise performance of our urban logistics assets and deepen relationships with our expanded client base. Additionally, the Manager led the way in establishing a dedicated power infrastructure and data centre team, helping to future-proof our existing assets and development pipeline, while also unlocking new opportunities in the data centre market for us.

This is driven by the Manager's entrepreneurial culture and agile approach which supports the exploration of new ideas and opportunities by speculatively investing in specialist resource. This is a key advantage of our externally managed structure, with the Manager absorbing the cost of identifying and incubating new opportunities - such as data centres, where Tritax Big Box now holds a first right of refusal. While recognising these qualities, the Board continues to provide constructive challenge to the Manager to ensure the best interests of the Company's shareholders.

Performance and dividends

The quality of our investment portfolio and continued growth in income through our asset management and development programmes enabled us to deliver record headline earnings in 2024. Excluding additional DMA income in the year, Adjusted EPS was 3.9% higher at 8.05 pence, supporting a covered total dividend of 7.66 pence per share, up 4.9% on 2023.

Carefully managing the balance sheet and deploying our resources to implement our strategy remain a major focus. A reduced LTV of 28.8% benefitted from improving asset valuations and UKCM's lower gearing at the point of acquisition. We also continue to have significant headroom in our debt facilities, allowing us to be opportunistic in the market. Our development programme remains highly flexible, with limited financial commitments, so we can adapt quickly to any changes in market conditions.

Outlook ‒ well positioned for growth with multiple opportunities to deploy capital accretively

Client engagement across both our standing portfolio and development schemes remains high. Clients are renewing on existing space and market take-up volumes are healthy, with the potential to increase in 2025. Corporates continue to evolve their supply chains in response to the ongoing supportive structural trends, albeit decision making is taking time.

New supply remains disciplined and speculative space under construction is at similar levels to 12-months ago. As was the case in 2024, speculative completions will be front loaded which will impact the quarter-by-quarter trajectory of vacancy. Overall, however, this gives us confidence in the scope for further rental growth, particularly in locations or building size bands where supply remains restricted.

Framed by these dynamics, our business has three clear multi-year growth drivers.

First, our portfolio is highly reversionary, with market rental growth in 2024 enhancing this opportunity further. The capture of this reversion over time helps drives net rental income and in turn earnings growth. With 20.9% of the portfolio subject to lease events in 2025, we expect to see a further increase in the rate of like for like rental growth translate into higher net rental income.

Our second growth driver is our targeted and client-led development activity, both speculative and build to suit, with the potential to add £306 million of rental income over time. Despite a tighter market for build to suit opportunities in 2024, we signed £11.1 million of pre-let agreements. We aim to keep our level of capex and development starts at a similar level to 2024. We expect to deliver an increase in development yield on cost, potentially towards the upper end of our 6-8% guidance, based upon the mix of schemes in the pipeline, stable construction costs and continuing attractive levels of market rental growth. 

And finally, exciting opportunities in data centres have the potential to deliver exceptional returns for the Company. We look to progress Manor Farm over the course of 2025, with the securing of planning consent, the first major milestone.

2024 has been a transformational year with the successful integration of the UKCM portfolio, the asset management opportunities it creates and the disposal of associated non-core assets. Supported by our strong balance sheet we enter 2025 well positioned with three powerful growth drivers in our business: capturing record rental reversion, advancing our highly attractive logistics development pipeline, and leveraging opportunities to develop data centres.

Aubrey Adams

Chairman

Manager's report

Market review

Long-term structural drivers support our sector

Shifting consumer behaviour, evolving supply chains and a corporate drive for sustainability are underpinning demand for high-quality, mission critical, modern logistics real estate and data centre facilities.

Shifting consumer behaviour

Consumer demand for an ever faster and more convenient purchasing/returns experience is driving e-commerce and the omnichannel retail network evolution. This includes network consolidation and realignment, and a shift to larger, high-quality, modern buildings that help lower the cost to serve. Meanwhile, our increasingly digital world is driving greater demand for data centres to house burgeoning cloud and AI demand.

Evolving supply chains

For occupiers navigating a fast-moving and often volatile market environment, resilience is now a priority, alongside optimising for efficiency, productivity and cost. This has translated into solutions such as holding higher stock volumes and a focus on supply chain visibility and technology adoption/automation.

Drive for sustainability

Building performance, clean energy and fleet transition are top of mind for many occupiers, as they look to enhance the sustainability of their operations and meet more stringent regulatory and stakeholder requirements. Meanwhile, the need to attract and retain skilled labour (in a tight employment market) has seen a focus on the provision of a better working environment, including onsite amenities.

Combined, these drivers mean that not only is location and access to skilled labour vital, but provision and resilience of power supply is increasingly in focus as energy needs increase.

Diverse demand continues to underpin market activity

Occupational demand remains healthy with 21.3 million sq ft of take up in 2024 (2023: 22.1 million sq ft)[1]. We continue to see high levels of engagement across both standing assets and new space resulting in strong renewal rates alongside continuing demand for new buildings.

Leading companies continue to invest for the future, driven by growing revenues and improving margins. Supply chains are a multi-year area of focus with the potential to contribute to both improved financial performance (lowering the cost to serve, facilitating new revenue streams etc) and enhanced business resilience. High quality logistics real estate that can support modern day, technology led supply chain requirements is therefore seen by many as core to future operations. This is leading to sustained and diverse demand from companies across all sectors.

2024 saw new space account for 61% of demand, of which newly developed speculative space contributed 39% (2023: 25%)1. This highlights the ongoing trend towards high-quality, technically capable buildings that support improved productivity and efficiency facilitated by increased use of automation and advancing technologies. The East Midlands, the UK's most important big box logistics market, remained the most active, accounting for 34% of take up across the UK1. 11.5 million sq ft was under offer at year end (2023: 11.1 million sq ft)1 and our own occupier hub continues to see high levels of enquiries.

Manufacturers remained prominent, contributing 25% of demand in 20241, as they continue to build resilience, diversify their supplier base and improve supply chain visibility. Many still expect to hold more stock onshore, with 29% of manufacturers suggesting, in our occupier survey delivered in partnership with Savills, that they plan to do so over the next three years.

Retailers accounted for 28% of take up1; most were omni-channel businesses evolving their supply chains to meet shifting consumer needs. Online-only retailers returned to the market through the second half of the year, with our 1.0 million sq ft letting at Kettering accounting for the majority of 2024 take up. We expect to see further activity in 2025 from both online-only retailers and parcel carriers.

Third Party Logistics companies ("3PLs") were less active in the market than in the previous year but still accounted for 23% of demand in 20241, underpinned by several large lettings. Leading 3PLs were part of the shift towards higher quality, often newer, space that can facilitate operational shifts such as adopting more building level automation; consolidating into larger units; decarbonising supply chains; and providing a better working environment, including improved amenities to help attract and retain staff.

Reduced supply contributed to well-balanced market fundamentals

New supply of logistics space declined markedly year on year with 14.7 million sq ft of completions (2023: 30.3 million sq ft). Completions were heavily front-loaded with 9.5 million sq ft delivered in the first quarter1.

Space under construction at Q4 2024, however, picked up year on year to 26.0 million sq ft (2023: 21.4 million sq ft)1. Importantly, the increase is almost entirely from an uptick in "build to suit" activity. The speculative pipeline stands at 12.8 million sq ft (2023: 12.3 million sq ft)1. Much of this is concentrated in a handful of geographic locations with a significant proportion scheduled to complete early in 2025.

Well-located supply is typically constrained by factors such as land availability, planning and power. This makes our strategically located land portfolio a particularly attractive attribute of the Company. It is held through capital efficient option agreements (which link our land purchase price to prevailing open market value, less a prescribed discount). This enables us to deliver on our 6-8% yield on cost development guidance.

Vacancy increased from 5.1% at Q4 2023 to 5.6% at Q4 2024 but was flat across the second half of the year1. Overall, market fundamentals remain well balanced but nuanced, as local market dynamics are diverse with significant differences at both a regional and sub-market level.

Strong rental growth in 2024

2024 has seen strong rental growth at both a headline and portfolio level. Prime headline logistics rents increased across all regions by between 25p and 50p (ex-Inner London where they held flat)1. Headline prime rents reported by CBRE reflect the top tier of rent for buildings of the highest quality and specifications in the best locations. MSCI ERV data, which better reflects portfolio-wide performance and a broader mix of buildings, shows UK distribution warehouse ERVs grew by 5.3% in 2024 (2023: 7.1%).

Logistics real estate capital market activity increasing

Big box logistics transaction activity totalled £3.1 billion in 2024, with a further £4.9 billion of multi-let and urban deals[2]. Significant pools of global capital continue to look to access the market. Two of the largest deals completed late in the year were, for example, by new entrants to the UK logistics sector.

Prime market pricing for logistics buildings remains at 5.25%1. Deal activity has continued to evidence market pricing with a significant pool of prospective purchasers for high-quality, prime product.

Investor interest in the sector remains high with prospective purchasers underwriting further rental growth on top of repriced yields. As a result, logistics pricing continues to look attractive despite ongoing uncertainty in global capital markets. The composition of returns also continues to appeal to investors with ongoing rental growth underpinning the scope for further income growth. Moreover, many buildings continue to have reversionary potential given the healthy market rental growth that leases often fail to capture fully during their term.

Record level of data centre demand

London remains the largest data centre market in Europe with 1,141MW in operation across an estimated 135 data centres[3]. 2024 take up in London totalled 116MW which exceeded new supply (65MW) for the third consecutive year1. Strong demand and low availability have resulted in rental rates increasing. Providers are, however, having to develop data centres in areas further afield to meet growing demand given the severe land and power constraints that exist in London.

With the same planning designation as logistics buildings, data centres have become an additional source of demand, further constraining the supply of land for logistics real estate. Furthermore, in September 2024, UK data centres were designated as Critical National Infrastructure: strengthening industry resilience, regulatory support and reinforcing the UK as an attractive destination for data centre users. 

A clear and consistent strategy that is delivering

Our strategy has three clear interlinked components that aim to deliver sustainable income and capital growth, robust performance through the economic cycle and an attractive and progressive dividend, while ensuring we meet our wider responsibilities and carefully manage risk.

The components of our strategy are:

1) High-quality assets attracting world-leading clients - delivering long-term, resilient and growing income.

2) Direct and active management - protecting, adding and realising value.

3) Insight driven development and innovation - creating value, future proofing and capturing occupier demand.

Sustainability is intrinsic to each of these elements and is a key enabler of business performance. Information on how we implemented the strategy during the period, including our sustainability initiatives, is set out in the following sections.

1) High-quality assets attracting world-leading clients

Our total portfolio comprises:

· The investment portfolio: These are logistics assets with a lease or agreement for lease in place. We believe our investment portfolio is the strongest in the UK in terms of asset quality, client financial covenant strength and lease length.

· The development portfolio: This comprises land, options over land and buildings under construction, generating best-in-class logistics assets for the investment portfolio (see insight driven development and innovation below).

· Non-strategic assets: These are modern, high-quality non-logistics assets acquired with UKCM, which we are divesting to provide funding for higher-returning logistics opportunities, particularly our logistics development programme.

Investment portfolio and non-strategic assets - key figures

Our priorities for 2024

We set the following priorities for 2024 in relation to the investment portfolio:

Resilient portfolio with embedded opportunities for value creation

The investment portfolio is split between:

· foundation assets, which provide attractive, lower-risk and resilient long-term income; and

· value add assets, which offer opportunities for capital or income growth through asset management.

Assets can move between these categories, as our asset management turns value add assets into foundation, or as foundation assets become value add, for example as a lease nears expiry.

At 31 December 2024, our total portfolio comprised:

At the year end, the total portfolio value was £6.55 billion (31 December 2023: £5.03 billion), with the increase primarily due to the addition of the UKCM assets. The total portfolio capital value increase was 2.8% higher, with asset values steadily improving, generated from further development gains, the benefits of our active asset management and 5.4% like-for-like ERV growth over the year. When including the net gain made on the acquisition of UKCM, the capital value increase is 3.7% over the year.

As discussed in the direct and active management section, at the date of this report we have exchanged or completed contracts to divest £181.2 million of non-strategic assets. Post completion of these disposals, the non-strategic assets will reduce to a pro-forma 4.0% of total GAV.

A broad and well-located client offering

While big boxes make up most of our investment portfolio, over recent years our investment strategy and development programme have increased the range of building sizes we can offer our clients. This allows us to meet our client needs for "first mile" mission critical logistics assets through to "last-mile" urban delivery units. UKCM has further broadened the portfolio, adding 4.2 million sq ft of logistics space, primarily in "last-mile" urban locations across 19 estates.

At the year end, the investment portfolio contained the following mix of building sizes:

The investment portfolio is well-diversified geographically, with a good balance of exposure to key logistics locations in the South East, the Midlands and the North of England:

Secure client base underpins income generation

The Group's diversified client base includes some of the world's most-important companies, with 64.5% being part of groups included in major stock market indices, such as the DAX 30, FTSE All Share, SBF 120, NYSE and S&P 500.

The number of logistics clients increased from 61 to 128 during the year, as the UKCM acquisition further diversified our client base. The occupiers of the acquired assets include major corporations, such as existing Group clients Ocado, Iron Mountain and GXO, as well as a range of smaller businesses. This offers us greater scope to engage with clients and meet their evolving needs through new developments or any vacancy that may arise over time.

The table below lists the Group's top ten clients across the investment portfolio:

Upward-only rent reviews provide attractive income growth

Most of our logistics leases benefit from upward-only rent reviews. Of total contracted rents for logistics assets:

· 15.1% are reviewed annually; and

· 83.3% are reviewed in five-yearly cycles, with the timings staggered so there are reviews taking place each year.

The table below shows the rent review types across the total investment portfolio at the year end:

Logistics leases with inflation-linked reviews specify minimum and maximum rental growth, which average 1.6% and 3.6% respectively. In tandem with fixed rent reviews, this provides certainty on the minimum rental increases the portfolio will generate each year.

We supplement this through open market and hybrid rent reviews, which can capture uncapped market rental growth, and other forms of active management to increase rental income. Approximately 82.0% of contracted rent from the UKCM logistics assets is subject to either hybrid or open market review, which is another attractive feature of its portfolio. This has increased our weighting to these types of rent reviews to 44.1% across the portfolio.

Due to the balance of open market and inflation-linked rent reviews, and the growing rental reversion in the portfolio (see below), we remain positive about continuing to deliver attractive, long-term income growth from our investment assets. Information on rent reviews in the period can be found in the direct and active management section below.

Increasing ERVs and record rental reversion provide significant opportunity to grow rental income

At each valuation date, the valuer independently assesses the estimated rental value (ERV) of each asset in the investment portfolio. This is the rent the property would be expected to secure through an open-market letting at that date.

At 31 December 2024, the investment portfolio ERV was £362.9 million (31 December 2023: £277.0 million), which is £79.2 million or 27.9% (31 December 2023: 23.0%) above the contracted rent. The increase in the ERV reflects the addition of the UKCM logistics assets and the like-for-like ERV growth in the investment portfolio of 5.4% during the year. We have opportunities to capture this reversionary potential through open-market rent reviews, lease renewals, new leases or lease regears.

In addition to capturing reversion, we can grow income through filling vacancy in the investment portfolio, which stood at 5.8% at the year end (31 December 2023: 2.5%). The increase is part driven by the consolidation of the UKCM assets which has a naturally higher vacancy level and three speculatively developed buildings that reached practical completion in November / December 2024. As our business has evolved, including both a higher amount of shorter leased urban logistics and an element of speculative development, we expect to maintain a level of available to let buildings to capture demand in the market.

To assist in understanding our portfolio reversion, and the likely timing and quantum of its capture, we have provided additional disclosure in the tables below. These outline the split between review type and frequency over the next three years.

Long leases enhance income security

At the year end, the investment portfolio's WAULT was 10.6 years (2023: 11.4 years), with the foundation assets having a WAULT of 13.6 years (2023: 15.0 years).

Of total investment portfolio rents:

· 23.4% is generated by leases with 15 or more years to run; and

· 25.2% comes from leases expiring in the next five years, providing near-term opportunities to capture the growing reversion within the portfolio.

UKCM's logistics portfolio had a WAULT of 6.7 years on acquisition, creating opportunities to capture the reversionary potential of these assets over the coming years.

Full repairing and insuring ("triple net") leases result in high conversion of gross to net rental income

Most of our logistics asset leases are full repairing and insuring (FRI), equivalent to "triple net" leases in the United States. This means our clients are responsible for property maintenance during the lease term and for dilapidations at the end of the lease. This minimises our irrecoverable property costs, which resulted in 98.2% conversion of gross to net rental income for the year. Rotating the UKCM non-strategic assets into FRI leases on new logistics assets should deliver further direct property cost savings over the medium term, in addition to the immediate cost savings from the combination (see the financial review for more information).

Portfolio quality reinforced by strong sustainability characteristics

EPC ratings are a key benchmark for both investors and occupiers and we are continuing to work with our clients and consultants to improve the EPC ratings of our buildings where possible. We are also constructing all our new developments to a minimum standard of EPC A and BREEAM Excellent.

At 31 December 2024, 98% of the investment portfolio had an EPC rating of C or above (31 December 2023: 97%). The movement reflected our continued progress with improving EPC ratings through asset management, and the addition of the UKCM logistics assets. At the year end, all assets certified or expected to be certified by BREEAM (50%) had a rating of Very Good or above (31 December 2023: 51%).

Our priorities for 2025

In 2025, our priorities for the investment portfolio are to continue to:

· optimise our portfolio and recycle capital into higher-returning opportunities; and

· allocate capital to income-generating assets that meet our return criteria and enhance our portfolio, for example by further diversifying our assets geographically or broadening our client offer.

2) Direct and active management

Our priorities for 2024

We set the following priorities for 2024 in relation to active management:

Realising value and recycling capital through disposals

Capital recycling is a key part of our business model. We have deliberately constructed the portfolio to ensure it contains highly attractive assets with good liquidity, enabling us to sell when we choose, reinvest the proceeds into higher-returning opportunities - such as our development pipeline - and thereby improve the quality and returns prospects for the overall portfolio.

We constantly review the portfolio, to identify assets where:

1) we have completed our asset management plans and maximised value;

2) the asset's investment characteristics no longer fit our desired portfolio profile; or

3) the asset's future performance may be below others in the portfolio or have more risk attached to it.

We identify assets for disposal by analysing the associated risk and return profile. Risk criteria we consider include age, location, covenant strength, geographic and client concentration, rental income profile, energy and carbon performance and the opportunity for rental growth. We analyse the potential return expectations based on our asset management plans, view of rental growth, capex requirements and any marketing void and tenant incentive, in addition to considering further sustainability performance enhancements.

We also look closely at the capital market conditions, to establish whether we are acting at the correct point in the market cycle. We continually profile the most active buyers to establish their desired income profile, coupled with their transactional experience and credibility, to ensure we engage with purchasers with high execution abilities.

When we completed the UKCM combination in May 2024, our plan was to divest the non-strategic assets within 24 months. We have made excellent progress since then, exchanging or completing contracts to dispose of seven assets for a total of £181.2 million to date (representing 38% of the non-strategic assets), with a further approximate £177.4 million under offer and high levels of interest in the balance of these assets. We therefore remain confident of being able to exit the position within our planned timeframe.

These disposals reflect a blended NIY of 6.2%, a 2.8% premium to the assets' 31 December 2023 book value.

While the UKCM non-strategic assets are the main focus of our disposal programme, we remain highly disciplined in reviewing the logistics investment portfolio and identifying assets for divestment, as well as being opportunistic when we receive attractive proposals. In 2024, we exchanged on the sale of a 755k sq ft asset at Doncaster (let to Next) and sold a 388k sq ft asset at Crewe (let to AO.com) for total consideration of £125.0 million. This represented a blended NIY of 5.0% and a 4.1% premium to their book value at 31 December 2023.

Overall, the disposal activity noted above, which totals £306.2 million of assets exchanged or completed, has been conducted at a blended 3.3% average premium to book values.

Acquiring investments with asset management potential and a broader client offering

We continue to look for investments that can generate accretive total returns, support our income growth and broaden our client offering. This forms part of our ongoing portfolio optimisation and complements our development activity by typically offering lower risk and more immediate income.

In January 2024, we completed the acquisition of a 479,000 sq ft cold store building in Castlewood, a key East Midlands location. The property is let to Co-Op on a lease with 7.7 years remaining on purchase and 2.7 years to the next rent review at which point the rent is reviewed to the equivalent of 2.5% per annum compounded for the previous five year term. The purchase price of £46.0 million equates to a NIY of 5.75% and a reversionary yield of 7.3%.

Post period, in January 2025, we acquired a 627k sq ft cold-store building in Haydock, a core North West location, for £74.3 million. The property is let to Sainsbury's as its principal North West hub. Under the lease there is c.13 years unexpired term with a tenant break in c.8 years. The rent is reviewed on an uncapped basis to RPI every five years. The purchase price reflects a 6.0% NIY which, based on current and expected RPI growth rates, should create a running yield of 7.0% in 2028.

Growing and lengthening income

Through our active management approach we are making good progress in leveraging the rental reversion opportunity, growing income by £11.6 million through 70 initiatives, such as lettings, lease re-gears and rent reviews.

In 2024, 26.7% (19.0% in 2023) of the investment portfolio was due for a rent review (excluding the UKCM logistics assets). We completed 33 reviews in the year, including three open-market or hybrid reviews that were outstanding from 2023, with the table below showing the strong rental uplifts from the open-market reviews concluded.

EPRA like-for-like rental growth in 2024 was 3.9% (2023: 3.6%).

 2024 settled rent reviews and lease events

Significant lease events during the year included agreeing:

· A new 15-year agreement for lease with Greene King at the Stakehill asset formerly occupied by Tesco, where we achieved vacant possession upon lease expiry in December 2023. The agreement for lease was signed with a rental increase of 38.1% against the passing rent at the point Tesco vacated, resulting in a significant rise in the asset's valuation. Our refurbishment prior to the letting included a solar PV scheme, which helped increase the EPC from B to A+ and provides additional income to us through a power purchase agreement.

· A five-year lease extension at L'Oreal, Trafford Park, Manchester, at a new record rent for Trafford Park of £8.50 psf. The rental uplift was c.£400k pa or 22.1%.

· A reversionary lease renewal for a 15-year term with Next on the Doncaster asset, creating significant value add prior to the asset's disposal (see above).

Across our urban logistics assets we completed 32 lease events across new lettings, rent reviews and lease renewals. Significant uplifts through rent reviews and asset management were achieved at Ventura Park Radlett, Newton's Court Dartford, and Emerald Park Bristol delivering between 35% and 75% increases in rent. Our improvements to the multi-let estates include a pilot project at J6 Birmingham, to enhance signage, amenities such as food and beverage outlets, landscaping incorporating outside seating areas, and increased security provisions. We have identified the potential on some estates, such as Rugby and Kettering, to add multi-use games areas and running circuits.

We are particularly focused on capturing the reversionary potential of the logistics assets acquired from UKCM, having developed a comprehensive asset management plan as part of our due diligence, identifying short, medium and long-term initiatives and their potential impact on income and capital values. We have continued to refine our business plans for each asset and made good progress with implementing them. By the year end, we had completed 18 asset management initiatives, adding approximately £3.1 million to contracted rents of the acquired UKCM logistics assets.

Enhancing sustainability performance through integration, engagement and active management

By working in partnership with our clients on sustainability initiatives, we can increase rental income and capital values, while helping them to progress their own ESG targets. We have therefore integrated sustainability considerations throughout the investment lifecycle, as well as our management of the Group's supply chain and engagement with our clients.

Our overall objective is to achieve market-leading ESG performance, with a focus on practical action. Data is integral to maximising our effectiveness, ensuring we are tracking our performance and continuing to add value to our buildings through proactive asset management and innovation.

Our ESG strategy has four themes, as set out below. Our achievements in 2024 in relation to actively managing our portfolio included:

· Sustainable buildings: We have continued to refine our integration of ESG criteria into the investment process, including engaging with our advisers to understand how ESG factors are influencing transactions in the market. We utilised our updated ESG due diligence template to support the acquisition of UKCM and to integrate its assets into our ESG programme.

· Climate and carbon: We engaged Mace Consulting to build a bespoke interactive technology platform for us, which is allowing us to refine our net zero pathway into a timetabled and costed programme at both portfolio and asset levels. We have begun entering our asset-level plans and will be able to model and interrogate the impact of initiatives on the EPC rating and net zero carbon pathway for that asset, as well as the associated cost. We can then analyse the best point to begin works, such as a lease extension proposal or a potential void, integrate the initiatives into the business plan for the asset and use the information to support client negotiations and inform our portfolio management strategy and disposal decisions.

The decarbonisation platform can also incorporate analysis of power resilience on an asset-by-asset basis. This will enable us to consider if assets may be constrained if clients require more power in future, for example due to increased use of electric vehicles or automation. The platform enables us to model the impact of adding solar generation capacity or the potential for additional supply via the Grid.

In addition, we undertook a climate risk assessment of the entire expanded portfolio, to understand the impact of climate change to the real estate we own to enable us to identify risk and consider appropriate mitigation strategies. We disclosure further details relating to climate risk, including Task Force on Climate-Related Disclosures (TCFD), subsequently in our Annual Report.

· Natural capital: We continue to identify and implement biodiversity improvements across our standing assets, as well as generating wellbeing benefits through initiatives such as landscaping and exercise facilities at our urban logistics assets, as described above.

· Social value: We have put in place a new five-year social impact strategy for the Group, with a focus on improving educational outcomes and opportunities for young people. We are seeking to reach 250,000 young people over five years, by continuing to support the Schoolreaders charity and working with organisations such as the King's Trust and the charity Education and Employers. The strategy is overseen by the Tritax Social Impact Foundation, which was established in 2023 to be a centre of excellence and governance and to help us deliver and measure impact.

Our strong ESG performance continues to be reflected in the Group's external ratings. GRESB awarded us four Green Stars (out of a maximum of five) for the fourth consecutive year and an overall score of 85/100. Tritax Big Box Developments, the development arm of the Group, was awarded five Green Stars and scored 99/100, ranking it first in its peer group. It also achieved Global Sector Leader and Global Listed Sector Leader status in the Industrial category, and Regional Sector Leader and Regional Listed Sector Leader status in the Industrial and Europe categories. The Group retained its EPRA sBPR Gold Level certification, which recognises best practice in corporate ESG disclosures, and further improved its Sustainalytics score from 7.6 to 6.4 (Negligible Risk), as well as receiving the Region and Industry Top Rated badges.

Resourcing our asset management team for success

During 2024, the number of leases under management increased from around 90 to approximately 300. The Manager has continued its investment in its dedicated Big Box team, adding asset management expertise from other parts of the Manager, from UKCM's former manager and through direct recruitment. The asset management team has been further complemented with additional property management, development and ESG resource. The Manager's investment supports our hands-on approach to asset management, including building strong relationships with clients, understanding their supply chain and business plans, and identifying opportunities through regular engagement.

To ensure each client has a single point of contact for all the assets it occupies, we have split the asset management team by skillset, resulting in dedicated teams for single-let big boxes, urban logistics, newly developed assets and the remaining non-strategic assets. This also enables swifter execution of initiatives common to a type of asset, such as estate improvement works on our urban logistics parks, which can enable financial savings through efficiencies and economies of scale.

Continuing to digitalise our processes

In addition to the decarbonisation platform described above, we continue to invest in digitalisation to support our asset management programme. Initiatives in 2024 included:

· A new client engagement platform, to ensure our asset managers have easy access to key information on all our clients, are well informed ahead of meetings and asset inspections, and can shape bespoke asset management proposals. Information on the platform will include clients' financial accounts, supply chain information, ESG targets, and records of our client interactions.

· An app-based inspection report system, so our on-site intelligence gathering is quickly and efficiently shared with the wider team.

· Further developments to our asset business plan modelling system and enhanced reporting. The modelling system holds millions of data points incorporating legal, financial, development, specification, operational and ESG information. This enables our reporting to be more holistic and consider the portfolio-level impact of an individual asset initiative.

Monitoring client performance

We closely monitor all clients' financial performance and covenant strength each month. The analysis includes an INCANS score, which is driven by the clients' financial results, aged debt, late filings and other indicators. We also track performance over time, so we can work with clients to proactively address any potential issues. The new client engagement platform enables our team to instantly see the latest financial score for each client.

Priorities for 2025

Our asset management priorities for the year ahead are to:

· Continue to rotate out of non-strategic UKCM assets in line with our ambition to completely exit from this position within two years of the acquisition completion in May 2024.

· Continue to capture the significant rental reversion within the investment portfolio, with a focus on delivery of open market reviews scheduled in the year, and ensure we maximise the potential of the recently acquired UKCM assets.

· Continue to develop our client insights to identify further opportunities to create incremental value through our active and hands-on approach to management.

3) Insight driven development and innovation

Our priorities for 2024

We set the following priorities for 2024 in relation to development:

A carefully considered and low-risk approach to development

Development complements our investment portfolio by enhancing overall returns, as we target a yield on cost for new logistics assets of 6-8%, while carefully managing risk. We expect our 2025 development starts to achieve the top end of our 6-8% yield on cost range.

We control the UK's largest land portfolio for logistics development. It has the potential to deliver approximately 37.2 million sq ft of new space through developments, which could more than double our contracted rent roll. The pipeline is diversified geographically in prime locations and is highly flexible, enabling us to match our clients' requirements from urban or last mile assets to mega boxes. Once built and let these developments become investment assets for us.

We hold most of the land portfolio through long-dated options. These are capital efficient and reduce risk, as we typically only buy the land once we have received planning consent. This provides control over the quantum and timing of our purchases. The options include a typical 15-20% discount to prevailing land prices and additionally we can offset much of the site's planning and infrastructure costs against the purchase price. This means we typically secure an attractive development profit on drawdown and are insulated from the impact of changing land values over the longer term.

Another significant benefit of holding land under long-dated options is the flexibility it gives us to adjust our development activity upwards or downwards to match prevailing market conditions. This helps us to ensure the delivery of new space is optimised to drive performance.

Given the current position in the market cycle, we are seeing opportunities to acquire sites with planning consent already in place and vendors who are motivated to sell. We will consider these opportunities where they will support delivery of our development objectives and offer attractive returns.

Our Investment Policy limits land and development exposure to 15% of GAV, including a maximum exposure to speculative development of 5% of GAV. At the year end we remained well within these limits:

· land and development exposure was 5.8% of GAV; and

· speculative exposure (based on aggregated costs) was 3.4%.

Continued development progress in 2024

We continued to make excellent progress with the development programme in 2024. The level of construction starts, lettings and planning consents achieved are discussed under our 2024 objectives above.

In addition, we reached practical completion on 1.7 million sq ft of developments in the year, with the potential to add a total of £16.2 million to passing rent. Of this new space, approximately 47% was pre-let or let during construction and 53% was unlet at the year end. The unlet space comprised three speculatively developed assets which commenced construction in 2023 and reached practical completion in November and December 2024. The location is strong and we are seeing good levels of interest from potential occupiers.

A controlled level of speculative development is an important part of our development programme, as it enables us to meet the needs of clients with short-term requirements for new space. We take a very calculated and measured approach to speculative development and only proceed in locations where we have a clear indication of occupier demand. Since our acquisition of our development platform, we have let 69% of speculative space prior to completion. We allow for up to 12 months' void period when appraising speculative development opportunities.

We place a very high priority on health and safety, and in 2024, we implemented several new measures for assessment, reporting, and review. We continue to make health and safety performance a key consideration in selecting contractors for our construction projects.

The UK's largest land portfolio for logistics development

We categorise our development portfolio as follows, based on the timing of opportunities:

1. Current Development Pipeline - assets under construction, which are either pre-let, let during construction or speculative developments. The Group owns these sites.

2. Near-term Development Pipeline - sites with planning consent received or submitted, and where we aim to begin construction in the next three years. The Group will own some of these sites, with others held under option and either pending planning consent or where we have achieved outline planning but have yet to acquire the land.

3. Future Development Pipeline - longer-term land opportunities, which are principally held under option, and which are typically progressing through the planning process.

1) Current development pipeline - assets under construction

At 31 December 2024, the Group had the following assets in the current development pipeline. The total estimated cost to complete is £101.2 million and the assets have the potential to add £21.8 million to annual passing rents.

2) Near-term development pipeline - construction expected to commence within the next 12 to 36 months

At the year end, the near-term development pipeline consisted of land capable of accommodating 5.7 million sq ft of logistics space and delivering £53.7 million of annual rent. Of this:

· 4.3 million sq ft relates to land with planning consent; and

· 0.3 million sq ft relates to sites where we have submitted a planning application.

As at 31 December 2024, the Group was awaiting decisions on planning applications totalling 11.1 million sq ft.

The table below presents the near-term development pipeline at the year end. Movements in the figures are driven by construction starting (which will move space to the current development pipeline), or changes in our view on the likely timing of starts, resulting in movements between the two categories below. The ERVs in the table are based on current market rents and therefore assume no further rental growth before the schemes become income producing.

3) Future development pipeline

The future development pipeline is predominantly controlled under longer-term option agreements. Most option agreements contain an extension clause, allowing us to extend the option expiry date where necessary.

The future development pipeline has sites at various stages of the planning process, with multiple sites being currently promoted through local plans. We have continued to replenish the pipeline by securing options over new sites.

At 31 December 2024, the future development pipeline comprised 1,539 net acres with the potential to support up to 30.9 million sq ft of development and generate around £247.7 million of contracted rent, assuming no future market rental growth.

Development Management Agreements

While our development programme primarily creates assets for the investment portfolio, we occasionally work with a client to develop an asset for freehold sale to them, where this may help us to gain planning, open up a site and accelerate our profit capture.

We undertake these freehold sales through a Development Management Agreement (DMA), under which we manage the development of an asset in return for a fee and/or profit share. The Group does not own the site during construction or the completed investment and DMAs are therefore excluded from our asset portfolio. DMAs deliver a high-return, capital light but variable source of profit, which we can recycle into other development or investment activity.

Included with the DMA categorisation are pre-sales, where we sell land, or a project, prior to commencement of construction. In 2024, we pre-sold 0.4 million sq ft at Oxford and commenced construction of a unit for Siemens Healthineers. We also exchanged contracts with Greggs for a 0.3 million sq ft DMA which will commence construction in early 2025, following receipt of planning consent in November 2024.

The Group recorded £23.0 million of DMA income in 2024 (2023: £nil) and our guidance for 2025 is £10.0 million. The treatment and impact of DMA income is further discussed in the financial review.

Leveraging our expertise into power and data centres

Adopting a "power first" approach, Tritax Management has secured accelerated access to significant quantities of power in key locations around London. Shortly after the period end, we announced that we had acquired a site at Manor Farm, Heathrow along with a 50% stake in a joint venture with a European leader in renewable energy to develop a 147 MW data centre. This has the potential to deliver one of the UK's largest data centres in a prime London location and deliver exceptional returns for the Company's shareholders including a 9.3% yield on cost and a profit on cost of over 40%.

Critically, by undertaking a power first strategy, we can deliver the 107 MW Phase 1 at Manor Farm significantly quicker than by applying for power today. As such, subject to planning and securing a pre-let, Phase 1 could be completed and income producing as early as H2 2027. In addition, Tritax Big Box has secured a right of first refusal over future data centre opportunities identified by Tritax Management, including a potential 1GW of power pipeline.

Enhancing ESG through our development activities

ESG is a core element of our approach to development. Our progress in the year included:

· Sustainable buildings: We have introduced a low-carbon baseline development specification, which we use for each project and regularly update to reflect market evolution. We have also progressed our approach to delivering our embodied carbon target of 400kg CO2e per m2, including engaging with industry-leading suppliers to understand how key construction materials are transitioning to lower carbon emissions and beginning trials of different specifications of lower-carbon concrete. The embodied carbon target for each project is incorporated into the main building contract, with financial penalties for non-performance. The weighted average embodied carbon intensity performance for 2024 was 287[9] kg CO2e per m2. Our overall carbon performance assessment for each product includes analysis of the use of low-carbon and recycled materials. During 2024, the average recycled content of steel frames used in our development projects was 34%.

· Natural capital: New biodiversity net gain (BNG) regulations for developments came into force at the start of 2024. The regulations apply a mandatory 10% biodiversity uplift for new development projects, with developers having the option of providing biodiversity uplifts either onsite or offsite. BNG analysis already forms part of our development process for each site, and we are examining ways to effectively deliver this across the portfolio.

Our priorities for 2025

Our priorities for the year ahead for the development programme are to:

· commence construction on new developments consistent with our level of activity in 2024, subject to changes in the macroeconomic backdrop, with an average targeted yield on cost towards the upper end of our 6 - 8% guidance range;

· secure a blend of pre-lets and lettings of speculatively constructed assets;

· progress planning applications and ensure sufficient consented land is in a credible delivery state to support our long-term development activity; and

· aim to replenish land once developed, including considering acquiring land with existing planning consents.

Financial review

Our priorities for 2024

We set the following priorities for 2024 in relation to our financial performance and balance sheet:

Overview

The combination with UKCM completed on 16 May 2024, resulting in an approximate 7.5-month impact to the Statement of Comprehensive Income and full consolidation of all assets and liabilities within the Statement of Financial Position.

The Group delivered strong financial performance in 2024. Net rental income increased by 24.3%, reflecting the contribution of UKCM, development completions and rent reviews, less the impact of asset disposals in the prior year. The Group also recognised £23.0 million of DMA income in the year (2023: £nil).

Adjusted EPS grew by 15.0% to 8.91 pence (2023: 7.75 pence), which was a record performance for the Group. This resulted from the income growth described above, noting the increase in shares in issue as a result of the UKCM combination (see below). Adjusted EPS excluding additional DMA income grew by 3.9% to 8.05 pence (2023: 7.75 pence) (see note 15 for the calculation).

The key constituents of Adjusted EPS growth in the year are shown in the table below:

The total dividend for the year is 7.66 pence per share (2023: 7.30 pence), an increase of 4.9% and in line with the Group's dividend policy.

The EPRA NTA per share at 31 December 2024 increased by 4.7% to 185.56 pence (31 December 2023: 177.15 pence), with growth driven by the £243.7 million change in fair value of investment properties.

The business remains soundly financed, as UKCM's comparatively low gearing and our portfolio valuation growth helped to reduce the Group's LTV to 28.8% (31 December 2023: 31.6%). We were pleased that Moody's Ratings upgraded the Company's credit rating outlook to Baa1 (positive) from Baa1 (stable) and reaffirmed its long-term corporate credit rating during the year.

Acquisition of UKCM

The all-share acquisition of UKCM was completed by a Scheme of Arrangement on 16 May 2024 through the issue of 576.9 million new shares, at a price of 166.9 pence per share. This reflected consideration paid of £962.9 million, at an exchange ratio of 0.444 new ordinary shares in the Company for every UKCM share held, based on an NTA for NTA approach. The fair value of the net assets acquired was £1,047.6 million, as set out below.

The difference between the total consideration paid of £962.9 million and the fair value of the net assets acquired of £1,030.7 million, net of acquisition costs, was a net gain on acquisition of £67.8 million. The transaction has been accounted for as an asset acquisition, resulting in these assets and liabilities initially being accounted for in the balance sheet at fair value.

The consideration paid in shares of the company has been allocated across the net assets acquired by fair valuing the debt acquired, fair valuing working capital acquired (given the short term nature of the amounts these values have been taken to represent cost), fair valuing cash acquired (being the principal amount) with the remaining consideration being allocated across the investment properties acquired (refer to note 17 and 26).

The property assets were subsequently revalued at 30 June 2024, in line with the Group's accounting policy, and the gain was therefore recognised within changes in fair value of investment property during the period. Please also see Note 37 to the financial statements.

Acquisition of UKCM

Presentation of financial information

The financial information is prepared under IFRS. The Group's subsidiaries are consolidated at 100% and its interests in joint ventures are equity accounted for.

The Board continues to see Adjusted EPS1 as the most relevant measure when assessing dividend distributions. Adjusted EPS is based on EPRA's Best Practices Recommendations and, in addition, excludes items considered to be exceptional, not in the ordinary course of business or not supported by recurring cash flows.

Financial results

Net rental income

Net rental income grew by 24.3% to £276.0 million (2023: £222.1 million). Contracted annual rent at the year end was £313.5 million (31 December 2023: £225.3 million), with the movement reconciled below. The annual passing rent at the year end was £296.8 million (31 December 2023: £217.0 million). EPRA like-for-like rental growth was 3.9%.

Contracted annual rent

Other operating income - Development Management Agreement (DMA) income

As described in the insight driven development and innovation section, the Group earns DMA income from managing developments for third parties or pre-selling developments to owner-occupiers. This is an attractive and profitable activity as the third party typically funds the development, resulting in a high return on capital for us. We include DMA income within Adjusted earnings as it is supported by cash flows.

However, DMA income is more variable than property rental income and its timing can affect our earnings from period to period. In 2023, the Group recognised no DMA income due to a timing delay on a project. This project subsequently contributed to the £23.0 million of DMA income we recorded in 2024 and we currently expect DMA income of at least £10.0 million in 2025.

Over the medium-term, we expect the run rate for DMA income to be £3.0-5.0 million per year. To aid comparability across periods and to give us a recurring earnings figure to base our dividend on, we also calculate Adjusted earnings excluding DMA income above this run rate (see profit and earnings below). The additional DMA income is then available to be recycled into further opportunities across our development pipeline and/or other investment opportunities.

Administrative and other expenses

Administrative and other expenses, which include all the operational costs of running the Group, were £33.7 million (2023: £28.9 million). The Investment Management fee for the year was £24.6 million (2023: £22.0 million), reflecting the increased capital base following the UKCM acquisition.

The EPRA Cost Ratio (including vacancy cost) increased to 13.6% due to increased vacancy levels (2023: 13.1%). The EPRA Cost Ratio (excluding vacancy cost) reduced to 12.6% (2023: 13.1%).

We have delivered administrative cost synergies through the acquisition of UKCM, driven by a proportionately lower investment management fee and savings across other corporate overheads.

These savings contributed to 2024 earnings growth and we expect to generate further savings from operational and financial synergies in the medium term as we fully exit from the UKCM non-strategic assets and recycle capital into higher returning opportunities.

Operating profit

Operating profit before changes in fair value and other adjustments was £265.3 million (2023: £193.2 million).

Share-based payment charge and contingent consideration

Following the Group's acquisition of Tritax Big Box Developments ("TBBD" and formerly known as Tritax Symmetry) in 2019, senior members of the TBBD team became B and C shareholders in Tritax Big Box Developments Holdings Limited. The Group extinguished these shares in August 2023, and as a result no share-based payment or contingent consideration charges have been expensed in 2024 (2023: £2.9 million and £0.4 million respectively). In 2023, we recognised an early extinguishment charge in the Statement of Comprehensive Income of £21.1 million.

Financing costs

Net financing costs for the year were £63.5 million (2023: £44.9 million), excluding the loss in the fair value of interest rate derivatives of £5.3 million (2023: £11.2 million loss). The weighted average cost of debt at the year end was 3.05% (31 December 2023: 2.93%), with 93% of the Group's drawn debt being either fixed rate or covered by interest rate caps (see hedging policy below) (31 December 2023: 96%).

The movement in net financing costs reflects the higher average cost of debt and the increase in average drawn debt throughout the year to £1,921.9 million (2023: £1,629.2 million), which included the notional drawn amounts of the debt facilities acquired with UKCM totalling £200.0 million (see below). We capitalised £6.0 million of interest expense (2023: £4.6 million), reflecting the capital deployed into active development projects in the period.

The interest cover ratio, calculated as operating profit before changes in fair value and other adjustments divided by net finance expenses, was 4.4x[12] (2023: 4.3x). The net debt to EBITDA ratio was 7.3x[13] (31 December 2023: 8.2x).

Tax

The Group has continued to comply with its obligations as a UK REIT and is exempt from corporation tax on its property rental business.

A tax charge of £0.3 million arose in the year (2023: £0.6 million) on profits not in relation to property rental business.

Profit and earnings

Profit before tax was £445.8 million (2023: £70.6 million), with the increase primarily reflecting higher operating profit before changes in fair value and other adjustments, alongside stronger valuations for the Group's investment property. Basic EPS was 19.67 pence (2023: 3.72 pence). Basic EPRA EPS, which excludes the impact of property valuation movements but for FY23 included the one-off early extinguishment charge, was 8.93 pence (2023: 6.55 pence, restated).

Adjusted EPS [i]for the year was 8.91 pence (2023: 7.75 pence) with the supporting calculation located in note 15 to the accounts. The metric we see as closest to recurring earnings is Adjusted EPS excluding DMA income above the anticipated run-rate, which was 8.05 pence for 2024 (2023: 7.75 pence).

Dividends

We aim to deliver an attractive and progressive dividend. The Board's policy is for the first three quarterly dividends to each represent 25% of the previous full-year dividend, with the fourth-quarter dividend determining any progression. The aim is to achieve an overall pay-out ratio in excess of 90% of Adjusted earnings (excluding additional DMA).

The Board has declared the following interim dividends in respect of 2024:

The total dividend of 7.66 pence was 4.9% up on the 7.30 pence paid in respect of 2023. The pay-out ratio was 95% of Adjusted EPS.

The cash cost of the dividends in relation to the year was £174.9 million (2023: £135.6 million), with the increase reflecting the new shares issued to acquire UKCM (see equity issuance below), which were eligible to receive all of the interim dividends paid in respect of this financial year.

Portfolio valuation

For assets that are leased, pre-leased or under construction, the Group has appointed CBRE and JLL to independently value a select group of assets. These assets are recognised in the Group Statement of Financial Position at fair value. Colliers independently values all owned and optioned land. Land options and any other property assets are recognised at cost, less amortisation or impairment charges under IFRS.

The share of joint ventures comprises 50% interests in two sites at Middlewich and Northampton, relating to land and land options. These two sites are equity accounted for and appear as a single line item in the Statement of Comprehensive Income and Statement of Financial Position.

The total portfolio value at 31 December 2024 was £6.55 billion (31 December 2023: £5.03 billion), including the Group's share of joint ventures:

The gain recognised on revaluation of the Group's investment properties was £243.7 million (2023: £38.1 million), which includes the gain recognised on acquisition of UKCM. The investment portfolio equivalent yield at the year end was 5.7% (31 December 2023: 5.6%). The growth in portfolio value over the year is due to the UKCM portfolio acquisition (contributing £1.2 billion at the time of purchase) and was supplemented by gains recognised from asset management along with further growth in ERVs, which were 5.4% higher over the year.

Capital expenditure

Capital expenditure into developments was £221.7 million in 2024 (2023: £191.3 million). The acquisition of the UKCM portfolio added £1,149.1 million and was funded via a share for share exchange. Excluding the UKCM portfolio, total capex was £285.3 million in the year, with its deployment focused on development. The Group acquired one standing asset for £47.7 million in 2024.

Embedded value within land options

Under IFRS, land options are recognised at cost and subject to impairment review. As at 31 December 2024, the Group's investment in land options totalled £148.8 million (31 December 2023: £157.4 million). We continue to progress strategic land through the planning process. During the year we transferred £21.9 million of land held under option to assets under construction.

As the land under option approaches the point of receiving planning consent, any associated risk should reduce and the fair value should increase. When calculating EPRA NTA, the Group therefore makes a fair value mark-to-market adjustment for land options. At the year end, the fair value of land options was £18.0 million greater than costs expended to date (31 December 2023: £26.5 million greater).

Net assets

The EPRA NTA per share at 31 December 2024 was 185.56 pence (31 December 2023: 177.15 pence). The table below reconciles the movement during the year:

The Total Accounting Return for 2024, which is the change in EPRA NTA plus dividends paid, was 9.0% (2023: 2.2%).

Debt capital

At 31 December 2024, the Group had the following borrowings:

There were no changes to the Group's existing banking arrangements during the year, other than exercising a one-year extension option on the £500.0 million RCF, which now expires in October 2029.

The Group acquired the following facilities through the UKCM transaction:

· a £150.0 million revolving credit facility with Barclays Bank, which was due to mature in January 2026 and carried a margin of 1.90% above SONIA;

· a £100.0 million term loan with Barings Real Estate Advisers, at a fixed interest rate of 3.03% per annum. The loan matures in April 2027 and was fully drawn at the year end; and

· a second £100.0 million term loan with Barings Real Estate Advisers, at a fixed rate of 2.72% per annum. The loan matures in February 2031 and was also fully drawn at 31 December 2024.

In July 2024, we refinanced the £150.0 million Barclays RCF via entry into a new £150.0 million two-year facility, split between a £75.0 million term loan and a £75.0 million RCF. The revised facility is provided on an unsecured basis, so all previous security was released, and the margin was reduced and brought into line with the Company's corporate RCF pricing. The facility has two separate one-year extension options available, which subject to lender consent, could extend the maturity of the facility to 2028.

We also amended the security pool for the loans with Barings. These are now secured on logistics assets that we intend to hold for the long term, allowing us to freely dispose of the non-strategic assets previously used as security.

Of the Group's drawn debt as at 31 December 2024, 80% was at fixed interest rates (2023: 80%). For the majority of its variable rate debt, the Group uses interest rate caps which run coterminous with the respective loan and protect the Group from significant increases in interest rates. As a result, the Group had either fixed or capped rates on 93% of its drawn debt at the year end (31 December 2023: 96%). The weighted average cost of borrowing at 31 December 2024 was 3.05% (31 December 2023: 2.93%).

Debt maturity

At the year end, the Group's debt had an average maturity of 4.5 years (31 December 2023: 5.2 years). Following the refinancing of the Barclays RCF in July 2024, the Group has no debt maturing prior to mid-2026.

Loan to value (LTV)

The Group has a conservative leverage policy. At the year end, the LTV was 28.8% (31 December 2023: 31.6%), with the reduction largely reflecting the benefit of UKCM's low LTV of 14.2% on acquisition.

Net debt and operating cash flow

Net debt at the year end was £1,883.3 million (31 December 2023: £1,590.3 million), comprising £1,963.9 million of gross debt less £80.6 million of cash (31 December 2023: £1,626.7 million gross debt, £36.4 million cash).

Net operating cash flow was £195.4 million for the year (2023: £185.4 million).

Equity issuance

In relation to the all-share combination with UKCM, the Company issued 576,939,134 new ordinary shares to UKCM's shareholders. These shares were admitted to trading on 17 May 2024. Following this, the Company had 2,480,677,459 ordinary shares in issue at 31 December 2024, an increase of 30.3% in the year.

Priorities for 2025

Our financial priorities for the year ahead are to:

· maintain the Group's strong balance sheet and liquidity, and keep the LTV below 35%;

· continue to rotate capital into higher-returning opportunities;

· deliver further growth in income, Adjusted earnings and dividends.

Guidance

We consolidate guidance provided throughout this report for the financial year 2025 into the table below:

Going concern

We continue to have a healthy liquidity position, with strong levels of rent collection, a favourable debt maturity profile and debt costs which are substantially fixed or hedged.

The Directors have reviewed our current and projected financial position over a five-year period, making reasonable assumptions about our future operational performance. Various forms of sensitivity analysis have been performed, in particular regarding the financial performance of our clients and expectations over lease renewals, along with assumptions over future liquidity and particularly around debt refinancing events. As at 31 December 2024, our property values would have to fall by more than 50% before our loan covenants are breached at the corporate level.

At the year end, we had £519.0 million of undrawn commitments under our senior debt facilities and £80.6 million of cash, of which £101.2 million (see note 35) was committed under various development and purchase contracts. The Group had also exchanged to dispose of a big box investment asset for £79.0 million at the year end date. Our loan to value ratio stood at 28.8%, with the debt portfolio having an average maturity term of approximately 4.5 years.

As at the date of approval of this report, we had substantial headroom within our financial loan covenants. Our financial covenants have been complied with for all loans throughout the period and up to the date of approval of these financial statements. As a result, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future, which is considered to be to 28 February 2026.

Credit rating

The Group has a Baa1 (positive) long-term credit rating from Moody's Investor Services, which was upgraded from Baa1 (stable) during the financial year, reflecting the growing scale of the business along with strong credit ratios.

Alternative Investment Fund Manager (AIFM)

The Manager is authorised and regulated by the Financial Conduct Authority as a full-scope AIFM. The Manager is therefore authorised to provide services to the Group and the Group benefits from the rigorous reporting and ongoing compliance applicable to AIFMs in the UK.

As part of this regulatory process, Langham Hall UK Depositary LLP (Langham Hall) is responsible for cash monitoring, asset verification and oversight of the Company and the Manager. In performing its function, Langham Hall conducts a quarterly review during which it monitors and verifies all new acquisitions, share issues, loan facilities and other key events, together with shareholder distributions, the quarterly management accounts, bank reconciliations and the Company's general controls and processes. Langham Hall provides a written report of its findings to the Company and to the Manager, and to date it has not identified any issues. The Company therefore benefits from a continuous real-time audit check on its processes and controls.

Post balance sheet activity

In January 2025, the Company announced it had purchased a 74-acre site at Heathrow, London within the Slough Availability Zone, a key FLAP-D prime EMEA data centre location (the "Manor Farm site"), for £70.0 million.

Simultaneously, the Company acquired a 50% share in a joint venture with a leading European renewable and low carbon energy power generator. The JV enables accelerated power delivery to the Manor Farm site using pre-existing grid connection agreements.

In connection with these arrangements, the Company has entered into a development management agreement with Tritax Management pursuant to which Tritax Management has been appointed to provide development management and technical services, including pursuing planning, overseeing construction, pre-letting services, technical electricity expertise and overseeing the technical aspects of the Company's role in the JV and all power related elements.

In January 2025, the Company acquired a 627k sq ft asset in Haydock, a core North West location, for £74.3 million.

In January and February 2025, the Company sold or exchanged to sell £86.8 million of non-strategic assets and £79.0 million of logistics investment assets.

Key performance indicators

Our objective is to deliver attractive, low-risk returns to Shareholders, by executing the Group's Investment Policy and operational strategy. Set out below are the key performance indicators we use to track our progress. For a more detailed explanation of performance, please refer to the Manager's Report.

1 EPRA NTA is calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). We use these alternative metrics as they provide a transparent and consistent basis to enable comparison between European property companies.

2 GRESB changed its scoring methodology in 2024 and the result is not directly comparable to previous years.

EPRA performance indicators

The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). We provide these measures to aid comparison with other European real estate businesses.

For a full reconciliation of all EPRA performance indicators, please see Notes to the EPRA and other key performance indicators.

Principal risks and uncertainties

The Board has overall responsibility for risk management and internal controls, with the Audit and Risk Committee reviewing the effectiveness of the risk management process on its behalf. We aim to operate in a low-risk environment, focusing on a single subsector of the UK real estate market to deliver attractive, growing and secure income for Shareholders, together with the opportunity for capital appreciation. The Board recognises that effective risk management is important to our success. Risk management ensures a defined approach to decision making that decreases uncertainty surrounding anticipated outcomes, balanced against the objective of creating value for Shareholders.

Approach to managing risk

Our risk management process is designed to identify, evaluate, manage and mitigate (rather than eliminate) the significant risks we face. The process can therefore only provide reasonable, and not absolute, assurance. As an investment company, we outsource key services to the Manager, the Administrator and other service providers, and rely on their systems and controls.

At least twice a year, the Board undertakes a formal risk review, with the assistance of the Audit and Risk Committee, to assess the effectiveness of our risk management and internal control systems. During these reviews, the Board has not identified or been advised of any failings or weaknesses which it has determined to be material.

Risk appetite

The Group's risk appetite is reviewed annually and approved by the Board in order to guide the business. The risk appetite defines tolerances and targets for our approach to risk, with our risk appetite likely to vary over time due to broader economic or property cycles. In addition, we have a specific Investment Policy, which we adhere to and for which the Board has overall responsibility. For example, we have a limit within our Investment Policy, which allows our exposure to land and unlet development to be up to 15% of gross asset value, of which up to 5% can be invested in speculative development.

Principal risks and uncertainties

Further details of our principal risks and uncertainties are set out below. They have the potential to materially affect our business. Some risks are currently unknown, while others that we currently regard as immaterial and have therefore not been included here, may turn out to be material in the future. The principal risks are the same as detailed in the 2023 Annual Report.

Emerging Risks

As well as the Principal risks, the Directors have identified a number of emerging risks which are considered as part of the formal risk review. On a biannual basis the Directors, along with the Manager, undertake a horizon scanning exercise to identify possible emerging risks. Emerging risks encompass those that are rapidly evolving, for which the probability or severity are not yet fully understood. As a result, any appropriate mitigations are also still evolving. However, these emerging risks are not considered to pose a material threat to the Company in the short term, although this could change depending on how these risks evolve over time. Senior members of the Manager are responsible for day-to-day matters and have a breadth of experience across all corporate areas; they consider emerging risks and any appropriate mitigation measures required. These emerging risks are then raised as part of the bi-annual risk assessment where it is considered whether these emerging risks have the potential to have a materially adverse effect on the Company.

Given the significance of the UKCM corporate transaction during the year, the Board did consider whether this transaction and the integration of the UKCM portfolio influenced the principal risks as set out below. In short, the Board did not perceive this transaction to present any additional principal risks to the business, but any impact on existing principal risks has been fully taken into account. The emerging risks that could impact the Company's performance cover a range of subjects which include, but are not restricted to, technological advancement/AI, cyber risk, supply chain disruption and ongoing macro-economic uncertainty.

The Board is conscious of recent geopolitical events such as the change in the UK government and subsequent budget changes, along with the ongoing conflict in the Middle East and between Russia and Ukraine. Added to these are the new US government with the threat of trade tariffs, a new relationship with China and security considerations for NATO which are all events that have the potential to cause uncertainty in a short space of time. The Board continue to monitor interest rates and the general financial markets closely given the direct impact on the business.

PROPERTY RISK

1. Client default - the risk around one or more of our clients defaulting

Net probability

High

Net Impact

Moderate - The default of one or more of our clients would immediately reduce revenue from the relevant asset(s). If the client cannot remedy the default, we have to evict the client or the client becomes insolvent, there may be a continuing reduction in revenues until we are able to find a suitable replacement client, which may affect our ability to pay dividends to Shareholders.

Mitigation

Our investment policy limits the exposure to any one client to 20% of gross assets or, where clients are members of the FTSE, up to 30% each for two such clients. This prevents significant exposure to a single client. To mitigate geographical shifts in client's focus, we invest in assets in a range of locations, with easy access to large ports and key motorway junctions. Before investing, we undertake thorough due diligence, particularly over the financial strength of the underlying covenant and any group financial covenants. We select assets with strong property fundamentals (good location, modern design, sound fabric), which should be attractive to other clients if the current client fails. We continually monitor and keep the strength of our client covenants under review. In addition, we focus on assets that are strategically important to the client's business. Our maximum exposure to any one client (calculated by contracted rental income) was 15.5% as at 31 December 2024.

2. Portfolio strategy and industry competition - the ability of the Company to execute on its strategy and deliver performance.

Net probability

Medium

Net impact

Slight - An adverse change in the performance of our property portfolio may lead to lower returns for Shareholders or a breach of our banking covenants. Market conditions may lead to a reduction in the revenues we earn from our property assets, which may affect our ability to pay dividends to Shareholders. A severe fall in values may result in a fall in our NAV as well as a need to sell assets to repay our loan commitments. In a high inflationary environment, certain caps within rent review clauses may prevent us from capturing the full benefit of higher inflation. Competitors in the sector may be better placed to secure property acquisitions, as they may have greater financial resources, thereby partly restricting the ability to grow our NAV, deliver value to shareholders, further diversify the portfolio and add additional liquidity to our shares. Stubborn interest rates have prevented resurgent investment confidence such that investment yields have held flat in 2024.

Mitigation

The Group is focused on a single sector of the commercial property market, the property portfolio is 94.3% let, with long unexpired weighted average lease terms and an institutional-grade client base. Occupier demand is structurally supported by a range of sectors. All our leases contain upward-only rent reviews, which are either fixed, RPI/CPI linked or at open market value. These factors help support our asset values and overall portfolio performance. We undertake ongoing reviews of asset performance along with a review over the balance of our portfolio, split between Foundation, Value Add and Land as well as considerations over covenant, location and building type. Our asset performance is regularly appraised and where we feel the assets are mature in terms of performance, they are ear-marked for potential disposal. Our development portfolio is executed in a low-risk manner utilising capital efficient option agreements and only deploying significant capital once we have secured a pre-let or where a depth of occupier demand supports the case for speculative development.

3. Performance of the sectors clients operate in

Net probability

Medium

Net impact

Moderate - Our focus on UK logistics means we directly rely on a number of sub-sectors to lease our assets and pay rent. Insolvencies and CVA's among these occupiers could affect our revenues and property valuations. Poor performance and low profitability could affect our ability to collect rental income and the overall level of demand for space. This could in turn impact future rental growth. A broad range of sectors to some degree diversifies risk.

Mitigation

The diversity of our institutional-grade client base means the impact of default of any one of our clients is low-moderate. In addition to our due diligence on clients before an acquisition or letting, we regularly review the performance of the sub-sectors, the position of our clients against their competitors and, in particular, the financial performance of our clients. We have also increasingly been diversifying our client exposure to various sub-sectors, for instance within the retail sector i.e. online, food, homeware, fashion, other. The breadth of client sector exposure has been enhanced following the UKCM transaction. The risk around traditional retail is mitigated by the increase in online retail sales and supply chain concerns which has driven occupational demand through Covid-19 and beyond. Our portfolio is modern and of a high-quality nature and therefore is attractive to those with an online presence.

4. Execution of development business plan - there may be a higher degree of risk within our development portfolio.

Net probability

Low

Net impact

Slight - Our development activities are likely to involve a higher degree of risk than is associated with standing assets. This could include general construction risks, delays in the development or the development not being completed, cost overruns or developer/contractor default. If any of the risks associated with our developments materialise, this could affect the value of these assets or result in a delay to lease commencement and therefore rental income. The occupational market remains stable and while UK vacancy rates have increased over 2024, they have stabilised at around 5.6% and rental growth remains healthy.

Mitigation

The Company has a significant development pipeline, it represents 5.8% of our gross assets as of 31 December 2024. Our development strategy is low risk, and we target only investing significant capital into a development project once planning has been obtained, a pre-let agreement has been secured or where a depth of occupier demand supports the case for speculative development. Our appetite for speculative development is low and we have a limit of 5% of GAV exposed to speculative developments within our Investment Policy. The risk of cost overruns is mitigated by our experienced development team which includes a thorough procurement and tender process on all contracts, including agreeing fixed priced contracts. We undertake thorough covenant analysis and ongoing reviews of our contractors and secure guarantees in relation to build contracts where possible.

FINANCIAL RISK

5. Debt financing - LTV, availability and cost of debt

Net probability

Medium

Net impact

Moderate - Without sufficient debt funding, we may be unable to pursue suitable investment/development opportunities in line with our investment objectives. If we cannot source debt funding at appropriate rates, either to increase the level of debt or re-finance existing debt, this may impair our ability to maintain our targeted dividend level and deliver attractive returns to shareholders. Interest rates on the majority of our debt facilities are fixed or subject to interest rate hedging providing protection against significant increases in interest rates. We do, however, have modest levels of exposure to variable rate debt. Our next loan expiry is mid-2026, the rate of which is lower than prevailing rates and this is likely to mean that any new debt entered into is more expensive that our average cost of borrowing.

Mitigation

The Group has diversified sources of long-term unsecured borrowings in the form of £500 million in Public Bonds, £400 million in Unsecured Private Loan Notes and £250 million in Green Bonds. We also have £950 million of bank finance available split across three revolving credit facilities and a term loan, and £412.9 million of secured debt across five separate facilities. This helps keep lending terms competitive. This access to multiple debt markets should enable the Group to raise future liquidity in a more efficient and effective manner via an unsecured platform whilst at competitive rates. The Board keeps liquidity and gearing levels under review, as well as monitoring the bank covenants and any associated headroom within covenant levels. The Group has undrawn headroom of over £500 million within our current debt commitments, at 31 December 2024. The Group aims, where reasonable to minimise the level of unhedged debt with Sonia exposure, by using hedging instruments with a view to keeping variable rate debt approximately 90%+ hedged.

CORPORATE RISK

6. We rely on the continuance of the Manager

Net probability

Medium

Net impact

Moderate- We continue to rely on the Manager's services and its reputation in the property market. As a result, the Company's performance will, to a large extent, be underpinned by the Manager's abilities in the property market and its ability to asset manage and develop the Company's property portfolio. Termination of the Investment Management Agreement would severely affect the Company's ability to effectively manage its operations and may have a negative impact on the share price of the Company.

Mitigation

Unless there is a default, either party may terminate the Investment Management Agreement by giving not less than 24 months' written notice. The Management Engagement Committee regularly reviews and monitors the Manager's performance. In addition, the Board meets regularly with the Manager, to ensure that a positive working relationship is maintained and from time to time with the Manager's ultimate parent abrdn. Following the acquisition of 60% of the Manager by abrdn, this enhances the resources available to the Manager. In May 2022, Shareholders approved the extension of the Agreement with a new 5 year term. A 24 month written notice cannot be served by either party, unless there is a default, prior to May 2025.

TAXATION RISK

7. UK REIT status - we are a UK REIT and have a tax-efficient corporate structure, which is advantageous for UK Shareholders. Any change to our tax status or in UK tax legislation could affect our ability to achieve our investment objectives and provide favourable returns to Shareholders.

Net probability

Low

Net impact

Moderate - If the Company fails to remain a REIT for UK tax purposes, our property profits and gains will be subject to UK corporation tax.

Mitigation

The Board is ultimately responsible for ensuring we adhere to the UK REIT regime. It monitors the REIT compliance reports provided by:

• the Manager on potential transactions;

• the Administrator on asset levels; and

• our Registrar and brokers on shareholdings.

The Board has also engaged third-party tax advisers and auditors to help monitor REIT compliance requirements.

None of the compliance tests are close to exceeding the relevant thresholds.

OTHER RISKS

8. Macro-economic uncertainty

Net probability

Low

Net impact

Moderate - a severe downturn in the economy could impact a number of the Group's clients, contractors, and service providers, which could mean a loss of rental income and disruption to operations. Following Covid-19, there has been severe pressure on supply chains which led to high levels of inflation and whilst inflation has moderated, interest rates have reduced more slowly and this has meant that occupier confidence has remained subdued, resulting in slower occupier decision making.

Mitigation

A severe economic downturn could be caused by geopolitical events, civil unrest, terrorism or a pandemic.

The Group mitigates the impact of macro-economic issues by investing in high-quality investment assets that operate in a sector that has strong structural drivers and a supply demand imbalance in favour of owners. The Group monitors its client's financial health regularly and where appropriate and possible, enters into long leases. 

The Manager continues to monitor the business continuity plan of its suppliers to ensure the impact to the Group and its service providers is minimised.

The Manager continues to monitor the impact that the prevailing economic environment is having on the Group's clients in order to protect the Group's cash flow regarding rent collection, impact on dividends and banking covenants.

Covid-19 and supply chain concerns accelerated behavioural patterns such as online shopping, which have resulted in healthy levels of occupational demand. These factors are supportive of our business model.

9. Physical and transitional risks from climate change

Net probability

Medium

Net Impact

Slight - Environmental sustainability is a challenge that is currently affecting people and businesses. Changes in social attitudes, laws, regulations, taxation, and particularly client and investor preferences associated with this has the potential to cause significant reputational damage and financial impact on our business, should the Company not comply with laws and regulations, meet its ESG targets, or not meet stakeholder expectations in addressing these challenges. ESG requirements are likely to increase over time, including in relation to a transition to a low-carbon economy, and therefore the impact of a failure to comply has the potential to be even greater in the future, including through impacts on the value and liquidity of real estate assets.

Climate change has become increasingly relevant to real estate, particularly physical damage caused by wind, fire and flood. The Group's properties are generally modern and designed to withstand demanding weather but extreme events can exceed construction design parameters and damage from such events can impact on operational continuity for our clients.

TCFD risk management response is included in the Annual Report.

Mitigation

The Manager operates with a dedicated sustainability team as well as an ESG Committee who take operational responsibility for the Company's ESG matters. The Manager regularly reports to the Board, including monitoring against the Company's stated ESG targets and providing updates on future initiatives. ESG is embedded within our investment and development processes such that climate-related risks are assessed when purchasing assets and minimum standards of BREEAM Excellent, EPC A and net zero carbon in construction are targeted for development. We also actively participate and engage in several Real Estate and Sustainability organisations (such as GRESB, the Better Buildings Partnership, the UK Green Building Council and the British Property Federation) to ensure we are aware of future initiatives and challenges. We measure and report annually on our key ESG metrics to demonstrate how we are managing our ESG risks.

In 2024, TBBR updated its physical and transition climate risk assessments to understand the potential impacts of climate change on standing assets, using scenario analysis. We continue to integrate the outcomes of the assessments into our investment processes, including pre-acquisition due diligence, design specifications, and asset management plans.

We are rated by ESG Rating Agencies that demonstrate our ability to manage ESG risks, for example:

· Our Sustainalytics rating remained as Negligible Risk in 2024 in reflection of our management processes, as well as being awarded the Global Top 50 Badge;.

· We were awarded 4 Green Stars by GRESB and the Global Sector Leader for Development

· We were awarded an EPRA sBPR Gold for sustainability reporting for the fourth consecutive year.

· We achieved a CDP B rating for the second year in a row.

The buildings we develop are designed for increased resilience against the impact of extreme weather.

In respect of risks resulting from climate change, all our properties are insured. Our leases are 'Full Repairing and Insuring' (triple net) and so in the event that a property is unoccupiable due to damage from extreme weather, rent remains payable under the terms of the lease; correspondingly our clients can insure against loss of trade resulting from such events.